19/04/2024

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Everything You Need to Know

Everything You Need to Know

What Is the Sustainability Accounting Standards Board (SASB)?

The Sustainability Accounting Standards Board (SASB) is a nonprofit organization created to establish a consistent framework for businesses to report on sustainability issues. The SASB developed a set of industry-specific standards that companies can follow to disclose sustainability information that is essential to investors, because it could have a material financial impact on the business.

The SASB was founded in 2011, recognizing the need for a standardized language allowing companies and investors to communicate about issues that might affect a business’s finances, performance, and enterprise value over the long term. For instance, a telecom company may need to pay attention to social issues like customer privacy and data security, while a chemical company may be more focused on environmental issues such as greenhouse gas emissions and water management.

The SASB joined with the International Integrated Reporting Council (IIRC) in 2021, forming the Value Reporting Foundation (VRF). More recently, the VRF merged with the U.K.-based International Financial Reporting Standards (IFRS) Foundation, which created the International Sustainability Standards Board (ISSB) to continue the SASB’s mission of ensuring transparent, actionable reporting about sustainability.

Key Takeaways

  • The Sustainability Accounting Standards Board (SASB) is a nonprofit organization created to develop standards for companies to disclose information that could affect their financial picture.
  • SASB Standards provide a transparent, consistent, and industry-specific framework for measuring environmental, social, and governance (ESG) factors with “financial materiality.”
  • Companies use SASB Standards to report information beyond what is available in financial disclosures, while investors depend on this reporting to make informed decisions.

SASB Standards

SASB Standards enable companies to disclose sustainability-related information, including risks and opportunities that could affect their enterprise value and finances. The standards specify the environmental, social, and governance (ESG) issues that are most likely to have an impact on companies operating in each industry. SASB Standards cover 77 different industries, allowing companies to identify the sustainability factors that are most critical to their business activities.

Zeroing in on “financial materiality” focuses SASB Standards on issues that affect how a business creates and sustains enterprise value. SASB reporting provides a broader illustration than traditional financial reporting, which focuses on existing data from financial accounts. Other types of reporting, such as the Global Reporting Initiative (GRI) Standards, go even further than the SASB’s focus on issues that could affect enterprise value—assessing “impact materiality,” or a company’s economic, environmental, and social impact on the world beyond its own financial outlook.

These different levels of the reporting ecosystem provide information that is important for different types of users. SASB disclosures are similar to traditional financial reports in that they are geared primarily toward investors and others aiming to enhance their economic decision making. Meanwhile, reporting frameworks that include broader impacts may be relevant to a wider group of users interested in understanding a company’s overall effect on sustainable development.


Sustainability Accounting Standards Board.

How the Standard-Setting Process Works

The SASB published its standards in 2018, following a six-year process of evidence-based research and receiving feedback from relevant market players, including business professionals, investors, and subject matter experts. The SASB Standards Board, which was responsible for supervising and ratifying the standards, operated independently from the organization’s board of directors, which handled the SASB’s strategic and financial decisions.

SASB Merges into IFRS

On Aug. 1, 2022, the International Financial Reporting Standards (IFRS) Foundation officially consolidated the Value Reporting Foundation (VRF)—home of the SASB Standards—into its organization. The IFRS incorporated SASB Standards along with recommendations from the Climate Disclosure Standards Board (CDSB) into its newly formed International Sustainability Standards Board (ISSB), with the goal of creating a global set of sustainability disclosure standards.

Why Companies Use SASB Standards

Companies use SASB Standards to distinguish, analyze, and control the ESG factors with the most direct consequences on their ability to create value. SASB Standards provide organizations with cost-effective and industry-specific tools to communicate this critical information to the markets. Companies can also combine SASB Standards with other reporting frameworks to provide a more complete illustration of their sustainability and other factors to fulfill the needs of different audiences.

As of July 2023, 2,839 unique companies have reported sustainability information to the markets using SASB Standards since 2020.

How to Report Using SASB Standards

Companies that seek to improve their reporting of sustainability issues may consider how SASB Standards fit into their broader reporting regime, potentially supplementing and reinforcing other types of disclosures. The process of implementing SASB Standards begins with in-depth analysis of the industry-specific tools and determining the best channel to disclose sustainability information—which may include annual reports to shareholders, investor presentations, or the company website.

Once a company has a grasp of the relevant SASB Standards, it can perform a gap analysis to determine which sustainability metrics it is already reporting and identify areas for improvement. Then, the organization can develop its specific disclosures and establish a system for monitoring and adapting its sustainability reporting in response to shifting conditions and evolving investor needs.

Why and How Investors Use SASB Standards

To make informed decisions, investors need access to quality information about the ESG issues that could affect a company’s performance and value. SASB Standards play the critical role of making this information consistent and transparent to facilitate comparisons across geographies and asset classes.

Investors benefit from SASB data because of the focus on financially material sustainability issues, providing a view that extends beyond what can be discerned from financial statements. This allows investors to consider sustainability risks in addition to more traditional measures of risk. SASB Standards also help investors determine and manage sector-specific risks, as well as pinpoint key sustainability issues for engaging with companies.

What Is the SASB Materiality Map?

The SASB Materiality Map provides a visual breakdown of 26 general sustainability issues across 77 industries, illustrating which concerns are relevant in each industry. The full Materiality Map is currently available only to authorized users of the SASB’s online system, but anybody can access the Materiality Finder tool, where you can look up relevant sustainability factors for specific companies or compare several industries side by side.

What Is the Difference Between GRI and SASB Standards?

SASB Standards center on the sustainability issues that affect a company’s enterprise value, while Global Reporting Initiative (GRI) Standards consider the wider economic, social, and environmental implications for sustainable development. Companies may use both sets of standards in their reporting to provide more complete sustainability information geared toward different groups of stakeholders.

What Is the Difference Between TCFD Recommendations and SASB Standards?

While SASB Standards cover a broad range of sustainability issues, the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) relate specifically to reporting on the financial impact of climate change. The TCFD recommends disclosures on governance, strategy, risk management, and metrics and targets related to mitigating climate risk.

What Are the 5 Categories of the SASB?

The SASB categorizes the activities that could affect a company’s ability to create long-term shareholder value in five “sustainability dimensions:” the environment, human capital, social capital, business model and innovation, and leadership and governance.

The Bottom Line

The Sustainability Accounting Standards Board (SASB) created a framework for companies to disclose environmental, social, and governance (ESG) issues that could affect their financial performance and their ability to create enterprise value over the long term. The International Financial Reporting Standards (IFRS) Foundation has integrated SASB Standards into its reporting ecosystem, aiming to solidify a comprehensive and standardized framework to provide the markets with all the information they need related to sustainability.